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Stock Market Update. InvestWithAlex.com February 7th, 2014

Daily Chart February 7, 2014

Continue to maintain a LONG/HOLD position if invested -OR- be in CASH if not. 

2/7/2014 – Another large rally in the market with the Dow up 165 points (+1.60%) and the Nasdaq up 69 points (+1.69%). 

Many market participants are calling for the end of the correction and continuation of the bull market. I believe they might be premature and the overall notion is beside the point. 

As I have stated so many times before, the Dow Jones topped out on December 31st, 2013, ushering in the next leg of the cyclical bear market scheduled to bottom in 2017. While the long-term technical trend remains up and this could be viewed as a correction, my mathematical work is rarely off. First, it is yet to be seen if the rally over the last couple of days has any legs or if this is a simple bounce. Based on my calculation it is possible that Monday was the bottom, but the point of force was not strong enough to confirm an intermediary bottom. 

Is it possible that the point of force discussed below is the top and not the bottom? Yes, that is a possibility. However, before I change my position to such an outcome, we must first have a strong follow through early next week. If we do not and if the market proceeds to roll over and go lower, the points of force below once again become our primary targets and turning points. 

Either way you twist this, the situation above does not impact our overall trading portfolio. We continue to stay in CASH or LONG/HOLD while waiting for a confirmation that the bear market is indeed here. Please see tomorrows weekly update for a more detailed analysis. 

Short-Term Projections:

As of today, I am not adjusting the points of force below. My mathematical work shows two points of force coming in February. Typically we should anticipate a turning point on such dates. (Would you like to see the exact points of force in both price and time? Please +Subscribe to our premium service above). 

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Stock Market Update. InvestWithAlex.com February 7th, 2014 Google

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LinkedIn (LNKD) Generational Buying Opportunity?

Let’s make this very simple. Great quarter for LinkedIn. Pretty much as good as it gets. They lowered their forward guidance, hence the stock sell off. Should you buy?

Not if you like your money. No doubt, LinkedIn is a very well run company. Yet, it is way too expensive for my taste. With about $25 Billion market cap, forward revenue of about $2 Billion and slowing growth, LinkedIn is too richly priced. Certainty, the company will continue to grow at a fast clip, but even a stampede of unemployed workers coming to LinkedIn’s platform (due to upcoming recession) in order to spam each other about job opportunities won’t justify the valuation.

Now, valuation metrics aside, stocks tend to deviate (sometimes significantly) over a short period of time. Is it possible for LinkedIn to surge higher? Sure, but even technical picture is somewhat deteriorating. Today’s down gap is likely to be closed over the next few days. Yet, will LinkedIn and its expensive stock price be able to avoid the pull of the upcoming bear market? Given its rich valuation and slowing growth trajectory, I don’t believe so. If anything, I wouldn’t be surprised to see Linkedin stock price to be cut in half over the next 3 years.

linkedin chart

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Here is a good analysis

LinkedIn: Why Are Investors Paying So Much For This Stock?

Feb. 7, 2014 10:14 AM ET |  5 comments |  About: LNKD

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…)

LinkedIn’s (LNKD) Q4 and FYR lived up to expectations, but guidance was not what the market had hoped for. So once again the usual pounding happened in after hours trading, but to my surprise, not enough if you ask me.

Actually, the company’s results were great and I don’t think investors could have asked much more from the company. Anything more would have been unrealistic. But once again, the problem is not the results or even the guidance, it’s what you pay for it. And in LinkedIn’s case, investors are paying way too much.

I am not going to bother running down the numbers. The company’s results are here and the presentation is here. If you have not read them yet, go ahead and do so …

Let me tell you what shocked me from yesterday’s report. Earnings aside and taking only revenue into account, the chart below shows the quarterly revenue of LinkedIn over the past several years.

(click to enlarge)

The blue line is the quarterly revenue of the company up until its recent report. The extension to that, beyond Q4 of 2013 (the green line), are numbers filled in by me based on guidance. In other words, irrespective of the actual results, I started with Q1 of 2014 by plucking in $460 in revenue — which is management’s upper limit guidance — and from there I simply increase randomly revenue every quarter thereafter, so as to come within guidance of $2 billion in revenue for all of 2014 (the green line).

The red line calculates year-over-year quarterly revenue growth. Now up to the most recent quarter, quarterly growth on a year-over-year basis has been coming down since about Q3 of 2011. With the most recent results, it is now down to about 40%. But based on management’s guidance, that will come down to about 20% by the end of 2014.

My question is, is LinkedIn worth $26 billion? Is any company with $2 billion in revenue and with forward guidance of 20% revenue growth worth that much? In my book, LinkedIn is not worth $26 billion even with 50% year-over-year quarterly revenue growth, let alone 20%.

But let me ask investors another question. What will happen if the growth trajectory of the company continues to disappoint further in 2015 and 2016? How much of a multiple will the market put on LinkedIn then, if for example management’s guidance calls for 30% revenue growth in 2015 instead of the almost 50% that the market is expecting? Will the market still pay $26 billion for the company’s stock? My answer is no.

And if you want my opinion, if management disappoints again and the market realizes that the super high growth days are over, then it will mark the stock down beyond what anyone imagines. By how much we will have to wait and see, but even $100 a share is pretty farfetched for LinkedIn’s stock if you ask me.

The market was modeling $2.16 in revenue for 2014 and management gave the market around $2 billion. The market is modeling around $2.9 billion in revenue for 2015 and my guess is that analysts will be bringing that figure down. By how much makes no difference, because even with $3 billion in revenue, there is no reason for LinkedIn’s market cap to be around $26 billion anyway.

LinkedIn (LNKD) Generational Buying Opportunity?  Google

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Stock Market Update. InvestWithAlex.com February 6th, 2014

Daily Chart February 6, 2014

Continue to maintain a LONG/HOLD position if invested -OR- be in CASH if not. 

2/6/2014 – Big day in the market with the Dow Jones up 188 points (+1.22%) and the Nasdaq up 46 points (1.14%). 

The question on everyone’s mind is…..has the market bottomed? Is the correction over? 

As of right now and based on my work I see very little evidence of that. Our primary points of force and their price targets remain intact (please see them below). At least for today. We might have to adjust those targets if we are to see strong follow through over the next few trading days, but that is still to be seen. The market opened up with a 60 point gap in the morning, giving us an early indication that it will turn around and go lower (in short order) to close the gap. Further, subsequent move lower to hit our points of force before any sustained bounce from the January-February sell off can take place is highly probable. 

As such, our current position remains intact. If you are in CASH, maintain your cash position while waiting for a technical confirmation that the Bear market has started. Otherwise, maintain a long/hold position.  The long-term trend is still intact and bullish. 

Short-Term Projections:

As of today, I am not adjusting the points of force below. My mathematical work shows two points of force coming in February. Typically we should anticipate a turning point on such dates. (Would you like to see the exact points of force in both price and time? Please +Subscribe to our premium service above). 

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!! 

Stock Market Update. InvestWithAlex.com February 6th, 2014 Google

Daily Chart February 6, 2014

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How To Make A Killing In A Deflationary Inflation

InvestWithAlex Wisdom 20Today’s 5-10 Minute Podcast Covers The Following Topics:

Topic: Inflation or Deflation Over The Next 5 Years? How To Allocate Capital To Make A Killing -OR- How To Make A Killing In A Deflationary Inflation.  

    • Inflation or Deflation….what will win over the next 5 years? 
    • Why it is incredibly important for your overall portfolio. 
    • How you should position yourself now. 
    • What steps to take to make a killing over the next 5 years. 

Please tweet me your questions @investwithalex

Did you enjoy this podcast? If so, please review it on iTunes and share it with your friends as we try to get traction. Gratitude!!!

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Daily Stock Market Update. InvestWithAlex.com February 4th, 2014

Daily Chart February 4, 2014

Continue to maintain a LONG/HOLD position if invested -OR- be in CASH if not. 

2/4/2014 – A fairly slow bounce day in the market with the Dow Jones being up 72.44 points (+0.47%) and the Nasdaq being up 34.5 points (+0.86%). 

As of right now there is no indication in my mathematical work that this particular bear leg from the December 31st, 2013 top is over. I have a number of points of force showing a lower Dow Jones before an eventual turn around and a bounce. I advise that you continue to maintain our In Cash -or- Hold/Long position as we wait for the bear market confirmation. 

While such a stance might cause further short-term losses, it is the most prudent thing to do from a long-term trading strategy.

Short Term Update:  My short-term update includes exact points for force and anticipated turning points in both price and time. If you would be interested in knowing when the market will turn around….please visit our premium Subscriber section. 

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!   

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Who Makes More Money, Investors or Speculators?

InvestWithAlex Wisdom 19Today’s 5 Minute Podcast Covers The Following Topics:

Reader’s Question: “Is it better to be a long-term investor or a speculator. Who makes more money?”  – Robert Casper, TX 

    • Why This Is The Wrong Question To Ask. 
    • The Secret Truth Wall Street Doesn’t Want You To Know. 
    • Who Makes More Money. 
    • Who Should You Be In Order To Maximize Your Returns.  

Please tweet me your questions @investwithalex

Did you enjoy this podcast? If so, please review it on iTunes and share it with your friends as we try to get traction. Gratitude!!!

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Why The US Economy Is Just Like Philip Seymour Hoffman On Heroin

sick-global-economy-investwithalex

CNBC Writes: Marc Faber: Market volatility will continue, here’s why

“It would seem to me that it’s not just tapering that is putting pressure on markets,” Faber, the author of the closely watched “Gloom, Boom & Doom Report” told CNBC on Tuesday. “In emerging economies we have practically no growth, we have a slowdown in China that is more meaningful than the strategists seem to think and than the official, Chinese statistics seem to suggest.”

“That then puts pressure on the earnings of the multinationals because most of the growth in the world over the last five years has come from emerging economies,” he told CNBC Europe’s “Squawk Box.” No growth, he said, was causing “a vicious circle on the downside” with slowing emerging economies and inflated asset markets that are now deflating, in turn putting more pressure on asset prices and on the economies.

Faber’s comments come as volatility in equity markets continued this week, prompting concerns among traders and investors that markets were at the start of a sharp correction. The moves lower follow a rally last year on the back of the U.S. Federal Reserve’s monetary stimulus.

“Total credit as a percent of the global economy is now 30 percent higher than it was at the start of the economic crisis in 2007, we have had rapidly escalating household debt especially in emerging economies and resource economies like Canada and Australia and we have come to a point where household debt has become burdensome on the system—that is, where an economic slowdown follows.”

Read The Rest Of The Article Here

Marc Faber needs to stop reading my reports. In all seriousness, it is nice to see someone like Faber confirm your own analysis and investment thesis in its entirety.

He is, of course, right on the money.  When the entire global economy depends on massive amounts of credit and each country is trying to devalue their currency faster than the other, you know you have a big problem.  Here is a good way to look at the issue.

The US Economy and its global counterpart is no different from the Philip Seymour Hoffman. One of my favorites. The guy was on top of his game in one of the most competitive industries in the world, successful, rich and with the ability to land any type of a girl. What else does a guy need in this world?

Well, for him that wasn’t good enough. So he had to find an escape in booze and heroin. The US Economy functions in exactly the same way. Neither Greenspan nor Bernanke has the testicular fortitude to let the economy go through a typical recovery, clear the slate and keep moving on.

Instead, they have infused the economy with massive amount credit (aka heroin) at the first sight of a sneeze. Distorting all financial markets to a massive degree and making the patient addicted in the process.

Now, there is no going back. Just like Philip Seymour Hoffman OD on heroin, the US and Global Economy will OD on cheap credit. Leading to massive financial trouble around the world. There is no way to avoid it now.

While I agree with Faber, I have an extra level of analysis that he does not. Timing.  Again, my timing work is indicating that the bull market topped out on December 31st, 2013 and the market will now roll over to take us into the cyclical 2017 bear market bottom. 

With that said, right now would be a prudent time to protect yourself. 

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!    

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Stock Market Update. InvestWithAlex.com. February 3rd, 2014

Daily Chart February 3, 2014Continue to maintain a LONG/HOLD position if invested -OR- be in CASH if not. 

2/3/2014 – Another ugly day for the market with the Dow Jones being down -326 points (-2.08%) and the Nasdaq being down  -107 points or (-2.61%).

Again, based on my mathematical work, this is not a correction. As my earlier post “Market Top” from two weeks ago outlined and explained, December 31st, 2013 was indeed the top of the bull market that started in March of 2009 and the beginning of the final bear market leg that will take us into the 2017 cyclical bear market bottom.

Even though the market continues to go down, we still need a confirmation before taking a short position. As such, I continue to anticipate the market to bounce into the March time frame before resuming its bear market. If you remember, the market left a number of open gaps in the 16,400 area that will “technically” need to be closed.

Short-Term Projections:

(***This is the only time I will provide short-term projections here. They will only be available in our premium section thereafter). 

My mathematical work shows two points of force coming in February. One coming up this Friday and the other one on February 17th.  Based on my mathematical work, I believe February 17th will be the bottom of this bear move, reversal and subsequent bounce into the March of 2014. If market confirms, we are looking at the 15,025 on the DOW  as our projected negative price target.

However, if the market gets there sooner, there is a good chance that this Friday will be a turning point. I will keep you posted. Either way, we have to wait for a confirmation before taking our long position.

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!      

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Stock Market Update. InvestWithAlex.com. February 3rd, 2014 Google

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Harvard Economist Starts A Run On His Bank of America. Should You Follow?

 PBS Writes: Is your money safe at the bank? An economist says ‘no’ and withdraws his

bank run investwithalex

Why do I risk starting a run on Bank of America by withdrawing my money and presuming that many fellow depositors will read this and rush to withdraw too? Because they pay me zero interest. Thus, even an infinitesimal chance Bank of America will not repay me in full, whenever I ask, switches the cost-benefit conclusion from stay to flee.

Let me explain: Currently, I receive zero dollars in interest on my $1,000,000. The reason I had the money in Bank of America was to keep it safe. However, the potential cost to keeping my money in Bank of America is that the bank may be unwilling or unable to return my money.

Read The Rest Of The Article Here

After reading this article I am seriously considering running into my bank later on today and screaming out “Give me all of my money Bi*%#@, NOW”. It’s just my hope that they won’t misinterpret my demand for my own money and give me all the money in the vault. I don’t’ think the FBI would appreciate my sense of humor. (On the side note, I wonder how many keywords this paragraph has set off at the NSA).

Anyhow, I actually tried to withdraw a fairly large amount of money at my local branch of Bank of America a few years ago. Without giving it a second thought I walked in and asked for a miserly $125,000 in cash. With a smile of course. They gave a deer in a headlights look, the same kind of look I would expect if I was trying to cash in about $20 Billion, and then proceeded to tell me “I am sorry, we don’t have that kind of money on hand, would you like us to request that for you and you can come pick it up in 2 days. “

WTF? You have a huge vault and you don’t have $125,000 in cash on hand? That is not good.

Listen, the article above is right on the money when it comes to our banking system and highly recommend that you read it in its entirety.  The bottom line is, the American banking system is only as stable as the perception of stability associated with it. The banks, by their greedy nature, have lent out all of the money they have had.

If there is a run on the banks, no commercial bank in the US today will be able to meet its obligations to the depositors. Surely, the government will backstop, but that’s not the main point here.

The main point is that the banks are not paying any interest on deposits.  Thanks to the FED and their interest rates policies, you would be lucky to get 0.05% APY on your saving account.  That doesn’t sound fair, does it?  I don’t know why Obama and Bernanke/Yellen hate our senior citizens on fixed income so much.

Now, based on my mathematical timing work,  I reject the notion of the “PermaBears” and “Gold Bugs” that our economy and our markets will completely collapse, there will be a banking holiday and we will all be shooting rabbits for food.  Again, it is not going to happen.   

While I believe your money is inherently save at this juncture, I do agree with the premise of taking your money out of the banking system and trying to get a higher yield elsewhere. That is, if you want. 

So, what should you do?

1. Never have more than the FDIC insured amount on deposit at any given bank. If you do, you are a stupid wanker just asking for trouble.

2. Open a safety deposit box and store some cash there.   Always have a substantial amount of cash on hand.  If you want to take the diversification to the extreme open bank accounts in Hong Kong or Singapore and store your cash there.

Then what?

Do nothing. Just sit on it. Yes, I can give you some tips of what to do if you would like to earn higher yields, but that would come with additional risk.  Believe it or not, I think the US Dollar is substantially undervalued and will do very well over the next few years while financial markets around the world come down to the tune of 40-60%. Including the US.

Having large quantities of cash at the bottom of the bear market will allow you to come in and buy wonderful companies at huge discounts and that is how you make a lot of money over the next 5 years or so.  

BTW, I gave the same advice to my clients in 2006-2007 and that worked out pretty well.  

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

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Harvard Economist Starts A Run On His Bank of America. Should You Follow? Google

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Weekly Investment Update and Summary. February 1st, 2014. InvestWithAlex.com

daily chart Jan31, 2014

Continue to maintain a LONG/HOLD position.

Weekly Summary: 

Even thou the market had a number of significant down days during the week, the Dow Jones ended up down only -180 points or (-1.14%). Both the Nasdaq and the S&P fared much better. Loosing only -24 points (-0.59%) and -7.7 points (-0.43%) respectively. 

If this week can teach us anything, its that volatility is back. Every trading session was opened up with a fairly large gap. With Fridays gap being close to 200 points on the DOW. What does that mean?

It means the cyclical composition of the market has shifted from a general uptrend exhibited in 2013 and for the large part since the start of this bull market leg in March of 2009 to a bear market leg identified here last week. 

Again, my mathematical timing work had confirmed that the DOW Jones topped out on December 31st, 2013 at precisely 16,576, ushering in the new bear market leg that will take us into the 2017 cyclical bear market bottom. 

Now, most market participants believe that the decline since the start of the year is nothing more than a simple correction that is long overdue.  While I disagree we still have to wait for a technical confirmation before taking our short position to profit from the bear market leg.  Such confirmation must come from a short term bottom here, subsequent bounce and resumption of the bear move thereafter. 

Our model portfolio established at the beginning of the year has been in cash this entire time @10 Year Note, helping us avoid the decline. For our previous investments, we continue to maintain our LONG/HOLD position without adding anything new. Once the bear market confirmation arrives we will get out immediately and go short. 

If you recall, I have mentioned that the market opened up large gaps on the way down from 16,400. At this stage it is highly probable that the market will bounce back to those levels before resuming the bear market let once the bottom of this correction is set. When will that happen. Please see our Mathematical & Timing analysis below.  

Fundamental Analysis: 

As you know, my fundamental case remains fairly straight forward and clear cut. All stocks and most other markets (credit and real estate) are substantially overvalued due to massive infusion of credit by the FED over the last few years and pure speculation. I am acutely aware and as most market commentators point out, based on the P/E ratio of 18.5 and some other metrics that the market is not overpriced and is within its historic range. At lest suggesting that there is no need to worry about any sort of a decline. 

s&p ratio

However, everyone is missing the elephant in the room. The earnings for most corporations have been “juiced up” to the tenth degree by the same credit infusion. If you take the credit and those earnings out, the P/E ratio is likely to be in the 50-100 range. Making this market not only overpriced, but putting it in the “are you fucking kidding me overpriced” category. 

Please note, that is exactly what happened when the P/E ratio shot up to over 124 in May of 2009 even though the market had lost over 50% since October of 2007. When earning disappear (as they will), today’s valuations will look astronomical.   

Macroeconomic Analysis: 

It doesn’t matter where you look, we have the same cancer spreading across the globe. Massive credit expansion juiced up the FED. This week the Fed announced a further cut in QE from $75 Billion to $65 Billion due to perceived “Economic Strength”. I have argued for a long time that the FED will be unable to withdraw this support without a massive blow up one way or another. We already starting to see strain show up in emerging markets. 

With our mathematical work confirming the bear market over the next 3 years, this plays very well into our scenario. The bottom line is, our economy is driven by credit and will deflate on a large scale as soon as the credit intervention goes away (as it is now) and/or the velocity of credit slows down (as it is now). 

Technical Analysis: 

Technical picture remains murky. 

Long-Term: The trend is still up. Market action in January could be viewed as a simple correction in an ongoing bull market. 

Short-Term: The trend is down as the market structure turned bearish. Please see my timing analysis for further instructions. 

Overall, we must wait for a confirmation before taking a short position. 

Mathematical & Timing Analysis: 

There is a number of important mathematical turning points arriving over the weekend and next week. Will these points signal the end of the bear move and a reversal into an anticipated rebound? I believe so. As soon as the rebound completes we should see the market roll over the resume a bear market leg in March of this year.  

Time Targets: Coming Next Week.

Price Targets: Coming Next Week 

CONCLUSION: 

If you are out of the market as we have been, stay out. If you are still fully invested consider liquidating your positions as we go through a rebound over the next few weeks. Once the rebound plays itself out and the market confirms the next bear leg down, I would recommend going short at that time. 

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

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